Searching for a new office for your company? Get ready to encounter a bunch of commercial real estate jargon. If you don’t know an LOI from CBRE, fret not. We’re here to teach you your Class A, B, and Cs. Bookmark this page for future reference as you continue your search!

Abatement period

Another term for free rent, an incentive offered by landlords to tenants to sign a lease.

Air Rights

The property interest in the space above a particular piece of land. Typically, owning a parcel of land gives one the right to ownership of the space above it as well. The concept dates back to 13th century Roman law.

Amendment

A revision to a lease, part of (or sometimes a separate) legal document to express new terms and agreements between landlords and tenants.

Amortization

Amortization is an accounting term that refers to the additional interest cost you pay over the life of a loan term.

Base Year

Base year refers to the annual operating costs and taxes of a commercial space. In the event that the actual annual costs of maintenance and taxes exceeds the “base year,” commercial tenants may be required to pay a percentage of those overage costs, as stipulated in their lease.

Blackstone

An international private equity, asset management, and financial services firm headquartered in New York City.

Broker Commission

A sum of money paid to someone who finds a tenant to fill a leasable space. See also: “Broker Fee”

Broker Fee

A fee paid to a real estate broker for their services in securing a rented property for their clients. Broker fees can be paid by the renter or the property owner, depending on which party hired the broker for their services.

Brookfield Properties

Brookfield Properties is a real-estate services firm whose portfolio includes a wide range of office buildings.

Building Owner and Manager Association (BOMA)

The Building Owner and Manager Association, or BOMA, is an organization for commercial real estate professionals that sets guidelines for class A, B, and C buildings.

Business Improvement District (BID)

Business Improvement District, or BIDs, are designations that city governments use these to improve an area’s development by offering tax incentives to work or employ people in a specific geographic area.

Cap Ex

Capital expenditure, or cap ex, is the initial construction cost and your ongoing major capital improvements that go beyond repairs and normal maintenance. This includes major improvements to a space such new HVAC units, lobby renovations, etc. Cap ex can be used as a negotiating term in leases.

Cap Rate

Capitalization rate, or cap rate, is a multiple on the current income of a building. This is used in real estate valuation. When buying or selling a building, buyers look at the cash flow of the building and apply a multiple on it depending on the preceived risk of the income stream.

Cash-on-cash

Cash-on-cash refers to the ratio of income to cost in operating a commercial building.

CAT 5/5e/6 Cabling

A specification of data network capacity in a building.

CBRE

CBRE (Coldwell Banker Richard Ellis) is the largest commercial real estate services and investment firm in the world, with over $105B in assets under management in the U.S.

Class A Building

A category of the quality and standards of a commercial real estate building. Class A buildings typically offer things such as (but not limited to) fast elevators, double pane windows, energy-efficient utilities, and other amenities. Rents are usually above the average for the area.

Class B Building

A category of the quality and standards of a commercial real estate building. Class B buildings have few amenities and “fair to good” finishes and systems, according to BOMA. Rents are in the range of the average for the area.

Class C Building

The lowest ranked category of the quality and standards of a commercial real estate building. Functional space with rents below average for the area.

Commencement Date

Critical date term found in leases for the beginning of either the lease or rent.

Commercial Real Estate (CRE)

Commercial real estate, frequently abbreviated to CRE, is the class of property ownership (either buildings or land) that are intended to generate profit either in the form of capital gains or rental payments. Examples include office buildings, retail complexes, or apartments.

Common Area Maintenance (CAM)

Common Area Maintenance, or CAM, is the operating expenses for a building that is shared across all tenants that occupy the building.

Consumer Price Index (CPI)

A measure of price levels of various goods and services in the US, used as a cost of living metric.

Contingency

A sum of money set aside to cover unexpected overage costs in construction and build outs.

Coworking

A category of office space in which multiple companies or individuals utilize shared space or private office suites, serviced by a coworking provider, with shorter, more flexible terms than offered by traditional office leases.

Cushman and Wakefield

A real estate services company headquartered in Chicago, founded in 1917. Cushman and Wakefield is publicly traded on the New York Stock Exchange under the ticker symbol CWK.

Data Circuit

An internet connection that connects a space to the outside world. Similar to a cable modem at home, except that data circuits are under a more refined service level agreement, meaning that the provider must provide certain guarantees of uptime. Typically, business telecom connections utilize fiber optic connections, while many home connections use slower coaxial cable.

Defeasance

A fee paid to a lender, based on the expected interest of a loan, paid by a borrower when paying a loan earlier than the expected end date.

Deferred Rent

Accounting term used to describe the difference between the “straight line” cost of rent across the terms of a lease as the rent increases.

Depreciation

Depreciation is an accounting term that refers to the division of a cost over time based on the lifespan of an asset.

Distributed Antenna System (DAS)

A distributed antenna system, or DAS, takes cell service and boosts it in an office space. Typically offered in high rise office buildings to provide cell service where it normally would not reach.

The Durst Organization

A privately held commercial and residential real estate firm, established in 1915.

EBITDA

EBITDA is an abbreviation that stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Generally a measure of a company’s net operating income.

Eminent Domain

Eminent domain refers to the process used by government entities to take over a piece of land for government use, namely infrastructure projects like power lines, highways, pipelines, etc.

Encroachment

When a piece of one property or building hangs over the property line of another. This can include physical structure or natural structures like trees.

Equity Multiple

How much an investment is going to pay back over time.

Escalations

How much a variable is going to increase over time. This can apply to rent escalations, typically discussed in a cost prospectus.

Estoppel

Document that typically a building owner will ask a tenant to sign that states current obligations (expenses such as rent) or whether there are current debates to responsibilities between landlord and tenant. Typically used when a building owner must refinance a loan, as the bank will want to know about open issues in the building with tenants. Also seen when a building is being sold, traded, or purchased.

Executive Suite

A phrase used to describe smaller, furnished office suites, typically packaged with services like reception or food amenities, offered with flexible terms.

Fixed Rent

A monthly fee paid to lease a space, agreed upon in a lease contract. Fixed rent can increase across the life of the lease, based on the CPI or agreed upon increases laid out in the lease terms. Also called base rent.

Flex Desking

Flex desking, sometimes referred to as hot desking, refers to the practice of maximizing utilization rates of a workstation through the use of non-assigned desks. Workstations are therefore used on a first-come, first-served basis. The idea being that many workers spend their days away from the desk (in meetings, traveling, or working non-traditional hours) and therefore a dedicated space is not required and can be shared amongst other workers. See also: “Hot Desking”

Flexible Office Space

Commercial office space offered with shorter terms and the ability to expand or contract based on need, rather than a long-term lease offered by traditional office leasing.

Free Rent

When landlords offer several months of a lease “rent free” as an incentive to sign a lease. See also: “Abatement Period”

Gross Lease

A type of commercial lease in which the tenant pays a base rent which includes CAM and taxes. More commonly found in industrial buildings or smaller landlord buildings. Similar to signing an apartment lease that includes utilities in the rent.

Hines Interests Limited Partnership

A privately held real estate investment and development firm, headquartered in Houston, founded in 1957.

Hot Desking

Hot desking, sometimes referred to as flex desking, refers to the practice of maximizing utilization rates of a workstation through the use of non-assigned desks. Workstations are therefore used on a first-come, first-served basis. The idea being that many workers spend their days away from the desk (in meetings, traveling, or working non-traditional hours) and therefore a dedicated space is not required and can be shared amongst other workers. See also: “Flex Desking”

HVAC

A frequently used abbreviation for heating, ventilation, and air conditioning.

Internal Rate of Return (IRR)

Internal rate of return, or IRR, is an investment term that is used to measure return on investment. Similar to an interest rate. See also: “ROC,” “ROI”

JLL

Jones Lang LaSalle Incorporated (frequently shortened to JLL) is a global real estate and property consulting firm, specializing in property services and investment management.

Kushner Companies LLC

A privately held real estate development firm founded by Charles Kushner in 1985.

Landlord

The owner of a property that is leased to a tenant.

Lease Commission (LC)

Lease commissions, or LC, are fees paid to a broker to help lease an office building. See also: “Broker fee”

Lease Term

The length of the contract period for an office lease.

LEED Certification

A certification program run by the U.S. Green Buildings Council that rates a building’s environmental sustainability. Buildings can be rated “Certified,” “Silver,” “Gold,” or “Platinum.”

Letter of Intent (LOI)

A Letter of Intent, or LOI, is a non-binding agreement signed between landlord and tenant stating the intention of entering into a contract for either a building or a space. Because lease negotiations can take a long time, LOIs are used to lock-in a high-level agreement to move the deal process forward.

Loss Factor

A measure of the unusable space in a floor plan, such as space in between walls, pillars, or other obstructions.

Modified Gross Lease

A lease type, most commonly seen in office leases, in which the first year operating expenses (CAM and tax) are factored into the base or fixed rent. In following years of the lease term, expenses that exceed this base year are paid by the tenant.

Net Effective Rent (NER)

Net effective rent, or NER, is the total obligation tenant has to landlord in the form of rent. NER takes into account concessions like free rent offerings or tenant improvement allowances, adding them together with the overall cost to compare apples-to-apples how lucrative a leasing deal is versus another.

Net Lease

A lease type, seen in a variety of commercial real estate situations, that is among the most commonly seen. In this lease type, the tenant pays for a proportionate share of the building’s CAM and tax cost in addition to fixed rent.

Net Operating Income (NOI)

Net operating income, or NOI, is a landlord’s cashflow at the end of an operating period after expenses.

Net Present Value (NPV)

Net present value, or NPV, is the current value of future cashflows (such as rent) at a discounted rate. That discounted rate is usually based on the cost of acquiring capital (like an interest rate). NPV is typically used as a valuation metric of a real estate asset.

Non-disclosure Agreement (NDA)

Non-disclosure agreement, or NDAs, are contracts that prohibit information exchanged by two or more parties from being shared externally. These are not specific to real estate, but may be encountered in the leasing process.

Opportunity Zone

An opportunity zone is an “economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.” (IRS.gov)

Parent Guaranty

Someone who signs onto a lease to help assure the landlord of the credit worthiness of the tenant.

Percentage Rent

A lease type typically used in retail leases, in which the landlord will take a percentage of revenue of the tenant, either in leui of or in addition to a discounted base rent.

Point of Entry (POE)

A point of entry, or POE, is the physical entry point in which telecom providers connect to an office building. Multiple POEs are generally considered more desirable, as they allow for redundancy of the data connection, in the event that construction or other disruptions damages a data connection.

Point of Presence (POP)

A point of presence, or POP, is a centralized room where telecom carriers pull fiber data connections. This room will typically have redundant power, cooling, back-up power, etc. This space provides the connections for the whole building, from which connections can be run to individual offices.

Privately Owned Public Space (POPS)

Space in a municipality that is open to the public, though owned by a private party, as directed through zoning laws.

Proptech

A board term used to describe real estate technology, which can include property management software, smart building technology, internet-connected utilities, and more.

Proration

A discount offered on rent based on time actually spent in the lease. For example, if you start the lease halfway through the month, the landlord may prorate rent by 50% for that first month.

PSF

Per square foot — a commonly used abbreviation in leases.

Quiet Enjoyment

The right to use a space without undue disruption.

REBNY

The Real Estate Board of New York is an organization representing real estate professionals in New York.

REIT

Real estate investment trusts, or REITs, are investment vehicles that own and operate real estate to generate a majority of their income. Some of these may be publicly traded on stock markets, others could be private investments.

Rentable Square Feet

Rentable square feet, or RSF, refers to the total square footage that a tenant leases from the landlord. This is different from useable square face, which accounts for core infrastructure that you may not be able to use, such as pillars or in between walls or common areas of the building.

Return on Capital (ROC)

Return on capital, or ROC, is another term used to describe the profit made over the invested capital. See also: “ROI,” “IRR”

Return on Investment (ROI)

Return on investment, or ROI, is a metric used to measure the profit made over an amount of invested capital. See also: “ROC,” “IRR”

Rezoning

When a municipality changes the zoning classification (which dictates who is allowed to lease, occupy, and utilize a particular space) of a real estate property. For example, a retail space could be changed to a residential space.

Riser Closet

A vertical conduit that allows cabling to be run through the basement of a building to the top floor so that it can be routed into a particular office’s IT closet.

RXR

A privately held real estate investment and management firm headquartered in New York City.

Secretarial Services

A service offered by a third party provider that may include office administrative services such as call answering, calendar management, mailing services, etc.

Serviced Office

An office space that offers a wide ranging set of hospitality offerings.

Silverstein Properties

A real estate investment, development, and management firm headquartered in New York City, established in 1957, and privately owned by the Silverstein family.

Straight Line

The total amount of an expense over time, divided by the number of years in the lease term. For example, as rent increases over 10 years. “Straight line” rent would take the total over 10 years, divided by 10.

Subordination

When a loan or security is ranked below other claims to an investment. This determines the order of payment received.

Tenant

The occupier of a space owned by a landlord, leased for a fee (rent).

Tenant Improvement Allowance (TI or TIA)

Tenant Improvements, sometimes called TI Allowance or TIA, is money that a building owner gives a tenant to build out their space, usually to help tenants mitigate cost.

Term Sheet

A term sheet is a non-binding agreement that summarizes key elements of an agreement between two or more parties.

Tishman Speyer

A privately held real estate investment firm, established in 1978.

Triple Net (NNN)

Net net net, or NNN, is a lease type. In a triple net lease, the tenant pays CAM, insurance, and tax directly (outside of the lease), rather than reimbursing the landlord. This is important to know as it will have a significant effect on the tenant’s net effective rent (NER).

Useable Square Footage

Useable square footage refers to the space which the tenant can actually use to place furniture or a desk in the rented space. This is opposed to the rentable square feet, which includes areas which may be commonly shared between tenants.

Utilities

Services such as electricity, water, or telecommunications.

Virtual Office Services

A service offered by a third party which enables a company to use an address for the purposes of mailing services.

Vornado Realty Trust

A publicly traded real estate investment trust with nearly 20 million square feet of property under its management.

Whiteboxing

A condition in which real estate space can be delivered in which the space is “paint-ready,” free of hazardous materials, and demolished to building shell condition. There are different types of whitebox delivery, which may or may not include lighting, HVAC, or finished perimeter walls.

WiredScore

An organization that offers a standardized rating of a building’s cable infrastructure and how well it is connected to the outside world. Buildings can be rated as “Certified,” “Silver,” “Gold,” and “Platinum.”

Yield

Return on investment (ROI), expressed in a percentage.